Mizrahi Tefahot CEO Calls to Halt Election-Year Economic Benefits Amid Rising Defense Budget

Moshe Lari, CEO of Mizrahi Tefahot Bank, emphasized the need to stop sector-specific benefits and coalition funding during the election year, advocating for a five-year economic plan that addresses Israel's new reality. Speaking at the Calcalist and Mizrahi Tefahot Growth Conference, Lari highlighted the sharp increase in Israel's defense budget, which is set to reach 184 billion shekels in 2026, about a quarter of the total state budget and 8%-9% of GDP. He noted an additional 350 billion shekels planned over a decade for Israel's defense self-sufficiency, stressing that the defense budget will remain high and continue growing.

Lari warned about maintaining a responsible debt-to-GDP ratio, currently around 70% and projected to rise to 80%, cautioning against a debt crisis that could force cuts in public services or reduce living standards. He proposed economic adaptation through new priorities, including defense system efficiency, deep reforms in education and transportation, deregulation, tax policy adjustments, and reforming welfare and state aid.

Addressing the integration of the Haredi sector into the workforce, Lari suggested basing state support on earning capacity and expanding military conscription to enhance social mobility, reduce defense costs, increase productivity, and broaden the tax base. On monetary policy, he noted that while the Bank of Israel has been cautious in lowering interest rates, global trends show inflation stabilizing around 3%-4%, with some central banks considering rate hikes. He supported the Bank of Israel's gradual approach to avoid irreversible steps and highlighted the shekel's strengthening as a factor helping to moderate inflation.

Regarding the real estate market, Lari described it as challenging, with declining sales and prices but continued mortgage growth. He praised contractors' rational behavior and the role of contractor loans in ensuring buyers' creditworthiness, noting no significant deal cancellations due to these loans. Finally, despite the war and its impacts, Lari pointed to ongoing business optimism in Israel, attributing it to the entrepreneurial spirit but also warning of declining optimism that should alert policymakers to support small businesses.